Independent Contractor Sues Under Title VII

Dr. Barbara Salamon was a physician with hospital staff privileges at Our Lady of Victory Hospital when she claims her supervisor began sexually harassing her.

Generally, physicians with hospital staff privileges are deemed independent contractors and are not offered the same civil protections as employees. But regardless, Salamon filed a sexual harassment lawsuit in 1999, claiming the Lackawanna, N.Y., hospital violated her Title VII and New York City Human Rights Law (NYHRL) rights.

The 2nd Circuit recently gave Salamon's action the green light, even though both laws only protect "employees."

The panel ruled it was at least arguable, on the facts pleaded by Salamon, that she was a hospital employee, despite setting her own hours, directly billing her own patients and collecting neither salary nor benefits from the hospital.

Experts believe the court has opened the door to new Title VII claims from thousands of people who are usually pegged as independent contractors, including lawyers and others who exercise independent professional judgment.

"This decision has implications for every employer that hires independent contractors," says Shaffin Datoo, a lawyer with Venable. "Employers will have to make sure to treat independent contractors differently than employees. Failure to do so may impose liability upon the employer under the anti-discrimination laws, and unemployment and workers' compensation laws," he says.

The hospital defendants have since petitioned the 2nd Circuit for en banc review, arguing that the panel's judgment upends conventional legal wisdom within the circuit and conflicts directly with decisions from the 4th, 5th, 6th and 7th circuits. Salamon's lawsuit was thrown out in 2006 by the New York district court, which granted summary judgment to the defendants after ruling the doctor was an independent contractor.

But the 2nd Circuit revived the action in January, saying while "summary judgment may be appropriate in some cases concerning staff physicians suing hospitals, it is not appropriate in all."

Control Key
The panel also emphasized "there is nothing intrinsic to the exercise of discretion and professional judgment that prevents a person from being an employee. ... The issue is the balance between the employee's judgment and the employer's control."

Salamon, a gastroenterologist and internist, earned satisfactory performance reviews for two years before things turned ugly. She says the catalyst was her 1996 complaint that Dr. Michael C. Moore, the chief of gastroenterology at that time, was sexually harassing her. She says he made inappropriate remarks about her appearance and harassed her with unwanted sexual advances. When she protested to upper management, she claims the hospital retaliated by criticizing and monitoring her work.

Salamon and Moore's' relationship had deteriorated so drastically by 1999 that Salamon went to court. She accused Moore of retaliating against her by giving her undeserved negative performance reviews and seriously damaging her career prospects.

She also alleges the other hospital defendants were complicit and helped him to use the hospital peer review and quality assurance process to punish her.

The key to the 2nd Circuit resuscitating the lawsuit was the panel's willingness to look beyond Salamon's "independent contractor" label to the reality of the working relationship, says Anthony Costantini, a partner with Duane Morris and the appointed amicus curiae on the case. The 2nd Circuit emphasizes the most important factor that differentiates an employee from an independent contractor is the employer's right to control the manner and means by which an employee works, Costantini says.

Standards Imposed
Significantly, the hospital imposed standards on Salamon that she argues went beyond measuring the quality of her patient treatment, such as requiring her to do certain procedures or prescribe
certain drugs in order to maximize hospital profit.

She also had to comply with hospital policies and supervision, attend staff meetings and handle on-call duties for patients who were not hers. In sending the case back to the district court for determination, the appeals panel observed that "whether the methods that the hospital required of Salamon merely reflect professional standards or demonstrate a greater degree of control sufficient to establish an employee-employer relationship is a factual issue that is not resolved by the current record."

The defendants point out that other appeals courts have ruled hospital peer review and quality assurance programs do not constitute control over the manner and means of a physician's practice.

"Under the panel decision, a plaintiff would merely have to allege that the peer review process was discriminatory in order to raise an issue of fact as to the degree of the hospital's control over the physician sufficient to defeat summary judgment," the defense petition for a rehearing complains.

But Stephen Bergstein, a plaintiffs' counsel with Bergstein & Ullrich, suggests companies can forestall sexual harassment suits fairly easily, even if Title VII were to be extended to some workers who have traditionally been viewed as independent contractors.

"The employer has a chance to avoid a lawsuit by thoroughly investigating the claim, punishing the [alleged harasser] and just making it clear to everybody that 'we take this seriously.' A case like that won't go anywhere," Bergstein maintains.